Although housing prices are expected to drop in 2023, it will become more expensive to purchase a home.
According to a new projection from Freddie Mac, the for-sale cost of a home is expected to drop .2% in 2023. Meanwhile, the average 30-year fixed-rate mortgage is expected to increase to 6.4%.
A 30-year fixed-rate mortgage currently averages around 5.4%.
The increase could result in a $200,000 home costing about $23,000 more throughout a 30-year loan.
In 2022, house prices are averaging a 6.7% increase from a year ago. In 2021, house prices increased by 17.8% as interest rates were low.
But the Federal Reserve has tried to curtail inflation by raising interest rates. The result could have a dramatic effect on the housing market.
Freddie Mac expects just 5.1 million houses will be sold in 2023, down from 5.8 million this year and 6.9 million last year.
“Mortgage rates have increased at the fastest rate in four decades, quickly taking the wind out of the sails of the housing market,” said Sam Khater, Freddie Mac’s chief economist. “Caused by stubbornly high inflation and higher mortgage spreads, the rise in rates has created affordability challenges that have forestalled many consumers’ decision to buy a house.”
With fewer homes being sold, the housing supply is supposed to increase.
“As housing market activity continues to contract, we expect a gradual increase in the supply of homes available for sale, as compared to historically low levels last year. The combination of much lower demand and higher supply will cause home prices to decrease during the next year,” Khater added.